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PRACTICAL TRAVELER

PRACTICAL TRAVELER; The Costly Bargain Fare

By BETSY WADE

Published: July 19, 1987

Summertime is charter time, the season when economy-minded travelers reserve with their travel agents for trips to Europe and elsewhere at prices that even the plain-pipe rack airlines cannot match. The price is low because the charter organizer does not have a complex reservation system and high overhead and can make decisions fast. Sometimes the cheap ticket buys service equivalent to the best, but often enough it means seats crammed together, less-than-handy departure terminals, few, if any, in-flight amenities and unreliable flight schedules.

It's a classic tradeoff, fair enough provided certain prudent steps are taken. And students and academics with durable backs, among others who are expected to push this summer's charters to levels generally above 1985, find the tradeoff an acceptable one.

But the bargain falls apart when the ultimate happens, and a charter tour company or charter airline fails and travelers are stranded on the wrong side of the ocean the day school opens, or people spend their vacation money for pieces of paper useful only for inspection by a bankruptcy judge.

The ultimate did happen twice in the summer of 1984, and the impact was felt by more than 10,000 people who held vouchers for charter flights. One group had put out money for Arrow Air flights issued by Value Vacations of Winsted, Conn. The other group held vouchers for flights to Athens on Air National issued by Colossus Travel of Hartford. When these operations collapsed, some of the passengers received free alternative transportation or refunds in a reasonable length of time, but refunds for most of the worst-treated people in these two cases are in sight only now, three years later.

Shaking things loose took a group lawsuit instituted by a traveler, Terence Neilan, caught overseas in August 1984 by failure of Value Vacations. In February this year, a Federal judge concurred in one aspect of this suit: that a bank had been remiss in handling the customers' purchase money and was liable for misapplication of money that should have been available for refunds. In the Colossus case, and not by coincidence, a settlement for refunds unfolded after the Federal court's summary judgment in the Value Vacations case.

''If you steal $10,000 from one person, the law will probably catch up with you,'' says Thomas A. Dickerson, the lawyer in the Value Vacations case. ''But if you steal $10 from a thousand people, you may get away with it because who's going to court to get back $10?''

However, pursuing the theory that the thousand people could recoup if they got together, Mr. Dickerson has become a leading practioner of the travel class action, a lawsuit in behalf of all the people who lose when money is misapplied, corporations fail or the traveler is defrauded. It was to Mr. Dickerson, the author of ''Travel Law'' (Law Journal Seminars-Press, New York) that Mr. Neilan, a copy editor for The New York Times, went for help. Mr. Neilan wanted to get back the $200 he had paid for a regular airline ticket to return to the United States. The case developed by Mr. Dickerson named Value Vacations; David M. Kols, its president, and Norman Segal, its senior vice president; Arrow Air; Northwestern National Insurance Company, which had provided a surety bond to Value; the Connecticut National Bank and Southeast National Bank of Miami.

Mr. Dickerson won from Judge Lloyd F. MacMahon of United States District Court in Manhattan a judgment of liability against Southeast Bank of Miami, which had been used by Arrow Air. The judge ruled on Feb. 11 that the bank had improperly allowed Arrow to get control of customers' ticket money before their charters took off, although by law this money was to be held in escrow against completion of each flight. As a result of the bank's failure to monitor the amounts it turned over from the escrow account, Judge MacMahon wrote, ''Arrow was collecting as payment for past flights funds which were supposed to be used to pay for future flights.''

When Arrow abruptly ceased flying charters for Value Vacations, 3,800 travelers from America, including Mr. Neilan, were stranded in Europe and 900 Europeans were stranded in the United States and more than 5,000 people who had bought trips scheduled from then to Jan. 1, 1985, were left holding worthless vouchers from Value, which is now defunct. Arrow Air filed for bankruptcy in Florida in February 1986.

Judge MacMahon's ruling also approved a settlement with Connecticut National Bank, which was declared to have carried out its part correctly, earmarking for each flight each transfer of money to the bank in Miami. Some of the money was still at Connecticut National Bank at the time Arrow ceased flying, and the settlement allocated this, plus interest, a total of $700,000, and $50,000 more, to create an initial pool for repayments, and, a crucial factor, to pay some legal costs thus far, enabling Mr. Dickerson to go forward for his clients.

The Federal Court judgment has not yet produced refunds for the 10,000 clients. If there is no settlement with Southeast Bank, there will be a trial to determine the amount of damages it must pay, as well as a trial on the other parts of the lawsuit. Mr. Dickerson has already spent three years gathering material for the case, tracing in harrowing detail the fate of the entire $3.5 million that the ticket-buyers laid out, and figuring out how to get as much of it as possible back. His clients, too, had to be traced, because their addresses in the main were the addresses of their travel agents.